Government revises plans for childcare vouchers

The government has confirmed that it has revised its plans to phase out tax relief on childcare vouchers.

Instead of withdrawing the tax relief to all new entrants from April 2011 as was previously set out in the prime minister’s speech to Labour Party Conference in September, the government has said it will retain it at the basic 20% rate of tax only.

The change in policy was confirmed in a letter sent to the joint chairs of the Parliamentary Labour Party’s Women’s Committee, Fiona Mactaggart MP and Roberta Blackman-Woods MP.

This means that all users of the scheme – including higher rate tax payers – will be able to continue to benefit from the tax advantages. This will allow them to save approximately £900 per year on their childcare bill.

A spokesman for the Save Childcare Vouchers campaign said: “This is fantastic news. Parents, employers and childcare providers across the UK will be delighted that the government has listened to their concerns. Keeping the tax relief for childcare vouchers at the basic rate of tax will mean that the vast majority of parents will continue to receive the support they need to pay for quality childcare.”

The government’s initial decision was met with much opposition, with more than 92,000 people signing a petition against the introduction of phased tax cuts on the No 10 Downing Street website.

Sarah Jackson, chief executive of Working Families, said: “We are delighted that the government has reconsidered the tax relief on childcare vouchers and has listened to the many concerns expressed by parents and employers. This is no time to be withdrawing any support for parents in work, and vouchers can make all the difference to parents struggling to make work pay.”